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CMS proposes changes to Stark Law

On July 8, the Centers for Medicare and Medicaid Services (CMS) announced proposed policy, payment, and quality provisions changes to the Medicare Physician Fee Schedule for Calendar Year 2016, which are set forth in a proposed rule titled “Revisions to Payment Polices Under the Physician Fee Schedule and Other Revisions to Part B for CY 2016” (the Proposed Rule). The Proposed Rule, the first proposed update to the Medicare Physician Fee Schedule since the Sustainable Growth Rate was repealed in early 2015 (as discussed here), includes a number of proposed changes to the federal prohibition on physician self-referral (the Stark Law). The Stark Law generally prohibits a physician from referring a patient to an entity in which the physician has a financial interest or relationship when the referral is for the provision of one of certain “designated health services,” unless an exception applies.

Of particular note, the Proposed Rule includes two new proposed exceptions to the Stark Law’s prohibition on physician self-referral. The first proposed exception will permit payments or remuneration by hospitals, federally qualified health centers and rural health centers to physicians to assist with the employment of non-physician healthcare practitioners. This proposed exception is only applicable where the non-physician healthcare practitioner is an employee of the physician who receives the remuneration and the non-physician healthcare practitioner is employed to provide primary care services to the patients of the hiring physician’s practice. Furthermore, the non-physician healthcare practitioner is limited to providing only primary care services to patients under this exception. The purpose of this proposed exception is to meet the increased demand for primary care practitioners resulting from expanded access to healthcare created by the Affordable Care Act.

The second proposed exception relates to so-called “timeshare arrangements.” Timeshare arrangements are arrangements among physicians and hospitals or physician practices by which offices, equipment, personnel and other services are shared. Under a timeshare arrangement, a hospital or local physician practice may ask an out-of-town specialist to provide limited, as-needed services in space owned by the hospital or the practice and the hospital or practice provides the specialist with a fully furnished and operational office. CMS’s proposed exception would permit such arrangements provided that, among other things, physicians use the timeshare premises, equipment, personnel, supplies and other services predominantly for the evaluation and management of patients and not for the provision of designated health services.

The Proposed Rule also seeks to provide further guidance and clarification on the manner in which financial relationships are documented under the Stark Law. The proposed changes include:

Replacing the terms “agreement” and “contract” in several Stark Law exceptions with the term “arrangement”;

Clarifying that the writing requirement for many of the Stark Law exceptions can be satisfied with a single document or a series of related documents;

Creating a 90-day period for parties to obtain the requisite signatures to written arrangements, regardless of whether the failure to obtain signatures is inadvertent; and

Clarifying that lease arrangements and personal service arrangements need not be in writing if such arrangements last for at least one year and otherwise comply with Stark Law requirements.

In addition to the proposed changes to the Stark Law, the Proposed Rule seeks to make modifications to several other CMS programs. CMS is accepting comments to the Proposed Rule until September 8, 2015, and anticipates issuing a final rule by November 1, 2015.

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